Free Microeconomics MCQs with Answers

• A. Owners
• B. Customers
• C. Employees
• D. None of the above

Explanation: Owners, customers, and employees all have an interest in the company's decisions and performance, so each is a stakeholder.

• A. horizontal
• B. vertical
• C. homogeneous
• D. conglomerate

Explanation: A merger between two clothing firms combines businesses operating at the same stage and in the same industry, making it horizontal.

• A. horizontal
• B. vertical
• C. conglomerate
• D. homogeneous

Explanation: A fiber producer supplies an input to a clothing firm, so their merger combines different stages of the same production chain.

• A. contestable
• B. perfectly competitive
• C. oligopolistic
• D. export-oriented

Explanation: Sales maximization is associated with managerial firms, especially oligopolies, where firms compete through advertising, product…

• A. managers need to be paid enough to stop them leaving the company
• B. objectives such as profit are not maximized
• C. short-run profits are maximized
• D. long-run profits are maximized

Explanation: Satisficing means choosing an acceptable or satisfactory outcome rather than pushing an objective such as profit to its maximum possible…

• A. Like other firms in their industry.
• B. growth maximisers.
• C. leading firms in their industry
• D. unlike other firms in their industry

Explanation: Satisficing firms seek an acceptable level of performance rather than the theoretical optimum, so their behaviour is generally similar to…

• A. Williamson's
• B. classical economic
• C. Marxist
• D. monetarist

Explanation: Galbraith’s technostructure is the managerial group that controls large corporations, an idea consistent with Williamson’s managerial…

• A. common; different parts of the firm
• B. common; mangers
• C. conflicting; managers
• D. conflicting; different parts of the firm

Explanation: Behavioral theories view the firm as a coalition whose departments and groups may pursue conflicting interests, such as sales, production…

• A. growth.
• B. sales revenue
• C. managers utility
• D. profits.

Explanation: The threat of takeover disciplines managers because poor performance can reduce the firm’s value and invite acquisition.

• A. horizontal
• B. vertical
• C. conglomerate
• D. homogeneous

Explanation: A conglomerate merger combines firms operating in unrelated industries, such as clothing and software.

• A. sales revenue maximization
• B. maximization the growth of sales revenue.
• C. Sales maximization
• D. long-run profit maximization.

Explanation: Growth maximisation means maximising the rate at which the firm expands, commonly measured through the growth of sales revenue.

• A. AR minus AC is maximized
• B. MC = MR
• C. quantity sold is maximized
• D. sales revenue is maximized

Explanation: A sales-revenue-maximising firm chooses the output at which total sales revenue is greatest, rather than where profit is greatest.

• A. profit myopia
• B. principal-agent problem.
• C. merger mania.
• D. moral hazard

Explanation: When ownership is separated from control, shareholders as principals must rely on managers as agents, creating the principal-agent…

• A. respect of other managers.
• B. maximum profits.
• C. job security
• D. a large number of subordinates

Explanation: Williamson’s managerial utility model allows managers to pursue objectives such as status, job security and more subordinates instead of…

• A. does not know its MC and MR
• B. has too much information
• C. has too little information
• D. The first and third option

Explanation: A firm may fail to maximise profit when it lacks information about its marginal cost and marginal revenue, or more generally has too…

• A. sole proprietors
• B. partnerships
• C. public limited companies
• D. monopolies

Explanation: In a public limited company, numerous shareholders own the firm while professional managers control its daily operations.

• A. they are afraid of encouraging takeovers.
• B. shareholders have little control over managers.
• C. shareholders want higher dividends.
• D. both the first and third option.

Explanation: Managers of public companies may pursue growth, security, or personal objectives because dispersed shareholders cannot closely control…

• A. firms do not know how to maximize profits.
• B. firms have other aims
• C. it does not explain monopolistic competition
• D. Both the first and second option

Explanation: The traditional model assumes firms know their profit-maximizing choices and pursue profit as their sole objective, but real firms may…

• A. the impact of oil prices on car production
• B. The impact of money on inflation
• C. The impact of technology on economics growth
• D. The impact of the deficit on saving

Explanation: Oil prices affect the costs and output decisions of car producers, an industry-level relationship studied in microeconomics.

• A. Macroeconomic
• B. Microeconomics
• C. statements of description that can be tested
• D. Statements of prescription that involve value judgments.Economics

Explanation: Positive economics describes what is and makes claims that can be checked against evidence.